Sat, Jul 02, 2005 - Page 1 News List

US House opposes China's CNOOC bid

RE-THINK URGED The House of Representatives voted overwhelmingly to block the Bush administration from approving the offer for Unocal on security grounds

NY TIMES NEWS SERVICE , NEW YORK

Congressional members opposed to a Chinese bid to take over the California-based energy company Unocal built broader support on Thursday for their campaign to block the deal on grounds that it could threaten national and energy security in the US.

But China is not the first foreign country to seek energy assets owned by Americans. Indeed, oil industry analysts say that the effort by the China National Offshore Oil Corp (CNOOC) to outbid Chevron for Unocal appears to pose probably even less risk of generating domestic shortages or other energy-security headaches than other foreign acquisitions that have been approved by the government in the past.

For more than two decades the US has not blocked foreign acquisitions of energy properties by Saudi Arabia, Venezuela, Russia, France, Norway and Brazil, among others. Some of those deals, particularly Venezuela's purchase of Citgo, involve access to oil supplies vulnerable to disruption because they feed refineries and thousands of US gasoline stations.

By contrast, Unocal has few strategic oil assets in the US. The company, based in El Segundo, California, does not have refineries or gasoline stations, having sold them eight years ago.

"The assets involved in the Unocal transaction are not of the scale or geographic location to make them of critical importance to US energy security," said Amy Myers Jaffe, an energy fellow at the James A. Baker III Institute for Public Policy in Houston, Texas.

Still, the bid has prompted strong debate in Washington. On Thursday, Representative Carolyn Cheeks Kilpatrick, a Democrat, won House passage of her amendment to the annual appropriations bill prohibiting the Treasury Department from recommending the sale of Unocal to CNOOC.

And Thursday night, the House approved, by a vote of 398-15, a resolution stating that Chinese ownership of Unocal would "threaten to impair the national security of the United States" and that approval by Unocal's board of the bid should result in a "thorough review" by President George W. Bush.

The resolution was presented by Representative Richard Pombo, a Republican, whose district includes Unocal's headquarters. In his resolution, Pombo cited concerns about oil exploration technologies that have "dual use" in commercial and military applications.

But Representative Jim Moran, a Republican, said that blocking the Chinese bid was a dangerous move.

"They are holding a financial guillotine over the neck of our economy, and they will drop that if we do things like this that are not well considered," Moran said on the House floor.

"If we don't let them invest in Western firms, what are they going to do? They are going to invest in Iran or Sudan and make those governments much stronger than they are today," he said.

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